History Matters: Path dependence and innovation in British city ...

Figure 16: Inverse Herfindahl-Hirschman index of diversity in selected cities 1981-2005
0.008
0.007
0.006
Inverse
H-H index
of diversity
0.005
0.004
0.003
0.002
0.001
0
1981 1991
2005
Years
Reading Leeds Oxford Aldershot Cambridge
Northampton Warrington Great Britain
Newport
Swansea Wakefield Norwich Middlesbrough
to structural and technological ‘sclerosis’,
and hence the more vulnerable to shifts in
competition, trade and technology.
These propositions can be tested by calculating
the inverse Herfindahl-Hirschman (H-H) index
of market concentration. Figure 16 shows these
calculations for our sample of cities over the
period from 1981 to 2005. It may be seen that
the British economy as a whole has become
less diverse over the period. This is mirrored
in most of our sample of cities with the
exceptions of Wakefield and Middlesbrough
although neither of them was among the most
diverse economies by 2005.
The relationship between diversity in the form
of unrelated variety and new path creation in
our sample of cities is not strong. Thus, Figure
17 shows the correlation between the inverse
H-H index of market concentration – diversity
– and new firm formation in our sample for
2005. Although the relationship is positive it is
not strong: the R2 is only 0.1782. This suggests
that Jacobs’ type variety and diversity on their
own may not be major sources of new path
creation in urban economies. Instead we argue
that groups of sectors or ‘clustered variety’
appear more effective at generating new
pathways than simple diversity on its own.
We are not able to find relevant secondary
datasets to analyse possible transplantations
from elsewhere or the upgrading of existing
industries in the economies of our sample
of cities. This needs the kinds of detailed
historical analysis that we begin to use in the
next chapter.
2.7 Conclusions
We have argued that, once started, the sectoral
structures of city-regional economies develop
along those pathways over long periods of
time. Cities whose mining, heavy industries
and manufacturing made them world leaders
in the 19th century still bear the legacies of
those activities today. In practice it has proved
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